AI and ITM.
Sitting on the verandah at the Galle Face hotel in Colombo waiting to go to the airport for my flight home, I was pondering my future – well, the next 12 months to be precise. I’ve been considering some ideas:
- Writing one last book, combining the bull and the bear and bringing the backtesting and results up to date, and in full color.
- Separating the blog into different sections: the chart analysis and ITM Strategy, and a separate section with more ‘evergreen’ content, but organized into topics.
- Using different modes: audio books, interviews & discussions, videos etc, and possible face-to-face contact.
On the other hand, I could just keep on trading and indulging myself by travelling the world, moving into my fabulous new place and generally being a dilettante. Tempting.
Serendipity
Just then ChatGPT popped up and informed me that there was now GPTv5. I responded:
He (yes, I’m sure he’s a he) answered:
Let’s test this memory, I thought.
I was quite surprised – he nailed it, then offered to map my market niche. Wow! Knock yourself out, I replied. Here it is:
I was pretty impressed, even more impressed with his next offer:
If you like, I can draft the full blog post based on this competitor map in your style, so it’s ready to publish. That would keep your voice intact but make the message very clear.
Yes, please! I replied. (interesting aside – most people say please and thank you to him, I already checked)
So here it is, word for word from GPTv5:
Where the Smart Money Really Lives
If you’ve been around the options world for more than ten minutes, you’ve seen the landscape:
- On one side, the hype machines promising you 10x returns before breakfast.
- On the other, the theory merchants who could lecture for hours without ever placing a single trade.
Somewhere in between are the income chasers, grinding out covered calls and spreads in the hope of predictable cash flow, and the day-trading adrenaline junkies who live for the next “big move.”
And then… there’s a quiet corner of the map almost no one talks about.
The Two Axes That Actually Matter
Most people judge a trading strategy on one thing — profit. That’s like judging a race car only by its colour. What matters more is:
- Complexity – how hard is it to learn, execute, and stick with?
- Historical Proof – how much real, verifiable data backs it up?
Plot every major “style” of options trading on those two axes, and the picture gets interesting.
The Competitor Map
(Insert the competitor map image here)
- Bottom right – Day-trading gurus: simple enough, but no historical proof beyond a few cherry-picked trades.
- Middle low – Options income sellers: consistent… until it’s not. Historical proof exists, but returns rarely beat the market long-term.
- Top right – Academic theorists: high proof, high complexity — most traders drop out before they finish the first module.
- Top middle – Names like Larry McMillan: strong historical basis, but strategy complexity keeps it out of reach for many.
And then there’s the top left — simple, proven, repeatable.
Why That Upper-Left Quadrant Is Almost Empty
Because it’s the hardest to sell. Complexity sounds like value, and hype feels exciting. A strategy that’s both easy and historically bulletproof? That doesn’t fit the marketing playbook.
But it’s exactly where I’ve built my trading career — and exactly where my In The Money strategy lives.
What This Means for You
If you’re looking to actually beat the market without dedicating your life to staring at charts or memorizing academic formulas, the sweet spot is right there.
The question is — why settle for anything else?
Your Turn:
Where would your current trading approach land on this map? Be honest — complexity and proof are the only two axes that matter.
Surprised? Well, yes!
Well, you could have knocked me down with a feather – it actually sounds like me, so I decided to reproduce it here giving full credit to ChatGPT. What do you think? Pretty good?
Next thought: why have I been spending every Sunday writing the blog when ChatGPT can do it just as well, if not better?
Where to from here . .
Still deciding. But please feel free in the comments or contact forms to let me know what you think, and also anything you think for the future direction of the blog and the books.
I think that AI is going to change the whole landscape of everything we do. It is, IMNSHO, every bit as significant as the Internet.
I am considering how I can use it to do something new, just haven’t thought of it yet.
Many traditional ways of making money on the Internet (content sites, review sites, directory sites, etc) are going to find they just don’t make money anymore. Why would you use them when you have AI?
Books – well, we’ve already seen the enormous increase in books being published – and, in my opinion, the quality going way down.
And just for fun I got GPT to do a version of the image above.
To the markets . .
Sorry about last week’s blog – the internet on the east coast of Sri Lanka was completely hopeless, and I couldn’t even update my charts. Let’s look at the last 2 weeks.
SPY Charts
You wouldn’t have noticed from the financial press, but SPY made a new high last Friday. The previous high of $637.10 on 25 July was superseded by the close at $637.18 on Friday. Not much, I know, and some intraday prices went over that level, but we always use the closing prices for ITM.
The Friday before we had a very nasty drop – disappointing job numbers, 73,000 added in July, but that wasn’t the problem. Also announced was the ‘adjustment’ to the June figure of -133,000 jobs taking the figure down to 14,000 jobs. This was a big shock, and combined with the May revision being the largest downward revision (-258,000) since 1979 (excluding April 2020 Covid). (N.b. this excludes the March 2024 ‘benchmark’ revision when they discovered that the jobs figures for the previous 21 months had been too high.)
As always, when there is a drop the volume goes up, but it is worth noting that every day since then the volume has been above average, which is an encouraging sign.
It is also worth noticing that the 50 / 200 SMA golden cross kicked in in July, when SPY was trading at $620 (the thin blue line is the 50 SMA). This is the cross that most traders watch. The ITM 10/200 cross was in mid-May at $593 so we have an additional $27 (4.5%) of the SPY gain.
And on the weekly chart we see the hesitation at $640, which may prove resistance – this week will tell. I’ve added I an additional line, the blue dots, which is a long term up trend starting in March 2020. It’s a bit busy, but it gives us a good idea of what is happening.
SPYG Charts
SPYG also made a new high, and all the commentary about SPY applies here also.
The weekly chart shows that SPYG is bumping up against the lower bound of its trading channel. Let’s hope it breaks through.
QQQ Charts
QQQ has made a new high, but on less-than-average volume which is not encouraging. The volumes this year have, however, been significantly higher than the volumes last year.
I have left the 50 SMA on this chart also – the thin pink line. You can see that if we had been following the often-recommended 50/200 cross it would have gotten us out near the bottom of the market in April ($458), and back in at the start of July ($541), Whereas ITM got us out in March ($477) and back in in May ($518)
So ITM avoided $19 downside and gained $23 on the upside. Yet the 50/200 is still touted as the ‘best and safest’. Go figure!
On the weekly chart we can see that QQQ is back in its trading channel, and is currently testing the lower bound for support.
VIX Charts
I thought that we would look at the VIX from a very long perspective this week. It is based on monthly data so the peaks and troughs are not as high as they would be with daily data. You can see that we are in a low volatility period, but not ultra-low as in 2006 and 2017.
ITMeter
The week ahead . .
A busy week – Consumer Price Index (CPI) for July is out pre-market on Tuesday (Headline 0.2% Core 0.3% MoM expected), and Producer Price Index (PPI) pre-market Thursday (323.66 expected).
Earnings season is coming to a close with 90% having reported. 81% delivered EPS (Earnings Per Share) above estimates. Of the ‘Magnificent Seven’, Alphabet (Google), Apple, Amazon, Meta Platforms, Microsoft, Tesla have all posted their Q2 2025 earnings and all except Tesla delivered strong performances. Here’s a table:
I always wonder why Tesla gets lumped in with ‘tech’ as it is really an automaker, but there you go.
Only NVIDIA is left to report (they are always last) on 27 August. Expected Revenue of $29-30 billion (110%YoY) EPS of $0.73-75.
The futures . .
Are up a bit, but still 10 hours to market open.
This blog coming to you from . .
Australia! Yes, I got back yesterday after 103 days of hotels, hire cars, planes and boats. There’s always an adjustment when you get back – do you know that in your own house the sheets don’t magically get changed every day? A few surprises: four (yes 4!) speeding fines from France! But it’s such a relief to ditch silly little laptop and get back to my desk and big screens again. Some memories in Sri Lanka
Pasikudah beach from room
The unexpected: went for a massage – and in the change room where you put on these awful paper knickers I got trapped!
The door wouldn’t open.
Eventually someone came through the roof and rescued me by forcing the door. Not terribly relaxing!
And below: stopover in Singapore – naturally, one went to The Raffles for a Singapore Sling (USD 50+ I’ve repressed the actual figure).
Last day in Colombo
It is nice to come back with quite a bit more money than you had when you left.
I am truly grateful for my wonderful life and know that without ITM and trading it would never have happened.
Remember, if I can do it so can you – I was once dependent on a paycheck, plenty of outgoings and no money in the bank. It’s possible to change that, to leave it behind. If you are not yet financially free, I hope you get there – it’s a wonderful feeling.
Fingers crossed for a good week!
Heather
Trade the tide, not the waves
39 Responses
I’ve noticed many people in the comments discussing QQQ. I understand that QQQ often rises more than SPY during bull markets. However, based on my analysis, I believe QQQ is unlikely to outperform SPY when using the ITM strategy. Here’s why:
Liquidity – SPY has better liquidity than QQQ. If you compare their average daily volumes, the difference isn’t massive, but tighter liquidity still means lower trading costs and less slippage. Better is better.
Long-Term Performance – While QQQ tends to outperform SPY in bull markets, a full historical backtest tells a different story. Since inception (SPY in 1993, QQQ in 1999), SPY has actually delivered a slightly higher average annual return. Surprising, isn’t it?
Volatility and Time Decay – QQQ’s higher volatility leads to higher option premiums, which accelerates time decay. This isn’t a huge issue for ITM options since they have relatively little time value, but again—better is better.
Leverage Potential – The amount of leverage you can safely apply depends on the maximum drawdown. In my BackAlpha.com tests, with the same 3x leverage, SPY had a much lower max drawdown than QQQ. This means with SPY you could potentially go up to 3.5x or even 4x leverage. With QQQ, however, you’d likely need to stay closer to 2x–2.5x.
Because SPY can handle more leverage with less drawdown risk, I see no evidence that QQQ could outperform SPY under the ITM strategy.
I have followed your ITM money strategy for several years now, and went all in a couple months into the previous golden cross. I believe it was November, ’23. I have all but given up searching for a trading strategy that promises monthly income with just a couple hours a week of time spent.
Trying to make up for past mistakes, I am aggressive but still cautious in following your Turbocharged approach. It works great when we are in a hot market like we’ve been in since the latest golden cross. Your strategy has put my retirement from the corporate world in the crosshairs, and I am fully confident that my account will continue to grow well into my retirement. I do have a question. Have you given any thought into how you could look at shorter term moving avg crossovers to ease out of a market that is turning so as to minimize the drawdown of going full Turbo all the way to the death cross? What I have found, going all in TurboCharged, can produce some eye popping drawdowns during periods of uncertainty. I don’t want to introduce any confusing complexity for your readers, but does that make sense?
HI David,
glad your trading is going well.
RE getting out earlier with a more responsive SMA cross (is that what you meant?) – it is a question that comes up from time to time especially when we have been in a bull market for a while and people are wanting to ‘protect’ their capital, so I think that it is probably time to do a blog post on it.
If I haven’t done it in the next 2 weeks please get back to me and I’ll answer you directly.
h
I have read in one of the blogs recently about someone stating that getting out when the 10 EMA crosses down over the 20 EMA is a good time to get out and then the getting in symbol would be when the 30-day crosses over the 70 day. They did the back testing, and it seemed to work out better. I would love to hear your thoughts on this Heather. BTW, I’m a big fan of you Heather and have bought your books and reading your blog for the past year or two as well as trading along with you. I am most thankful to have found your trading strategy, and I think we are all truly blessed that you let us send you questions and that you reply back. You are very knowledgeable of the markets and a true mentor!
Hi Charity – what a conincidence! I just got onto the website to post the latest blog – and it is about using different SMAs. I hope it answers your questions – if not please get back to me.
And thank you for yout kind words! People sometimes ask me why I do it for free, what’s the angle? But it is my way of giving back as I have been very lucky in my life. And getting lovely comments like yours makes it worthwhile – thank you!
x
h
HI Charity – the problem with using different crosses to get in and out is that they are not mutually exclusive.
You could be getting a get out signal on, say, the 10/20 EMA deathcross, but the 30/70 goldencross may be saying get back in at the same time. The possibilities are detailed in the blog post: https://heathercullen.com/why-backtest/
So when do you decide to get back in?
Out of curiosity I ran the backtests on 10/20 (ending account: $14,111) 30/70 ($32,249) not great results when compared to the market (approx 20k)
You need a system that is unambiguous – you can’t have one signal saying ‘get out’ and the other saying ‘get in’.
Hope this helps
h
(and thanhk you for your kind words!)
Hi Heather. Hope all was well with your travels this year. I enjoyed seeing your posts on Facebook. As far as the new book goes, seeing an updated version of the bull and bear strategy would be wonderful. However, maybe something new included in there as well?? Us growth investors would love to see the in the money strategy done on the QQQ. I think it would make the book I must have for all of us as well as widen your audience a little. I’ve enjoyed your books and will add anything you create into my library, but I would really love for it to contain the strategy on the QQQ. Just my two cents. Thank you. Dan
Hey Dan – actually was intending to – I trade QQQ myself, it is an important index and has been (and, I venture to say, will be in future) the main driver of the US market.
I’ve been including it in the blogs for a couple of years – also with the proviso that I haven’t published the backtesting results for it – but (as you will have inferred) they are good.
So definitely if I do the book it will be in it.
And good that you enjoyed the travel stuff – I sometime wonder if I am being indulgent posting it, but I hope that people can see the reality of what ITM can do. (having once been dependent on a salary I know how much I appreciate it)
x
h
Whatever you decide to do, please keep the weekly blog and share when you take action like rolling out/up.
HI David – yes, I will – but you have all the info you need to do it yourself.
But it is nice to be part of a team of like-minded people, I really like it. So hang in there.
h
By following the ITM Options Turbo Method, we can at least double our money every 5 years starting with $1k and adding additional $1k every year. This is my own personal assumption using the past data from ITM Turbo Method.
2000 $1k
2005 $2.5k
2010 $5k
2015 $10k
2020 $25k
2025 $50k
2030 $100k
2035 $250k
2040 $500k
2045 $1mil
2050 ???
Hey George Henry – i’m going to get back into the backtesting . . really! Any day now!
x
h
I apologize. I think I may be missing something but to me this doesn’t make sense. If you invested $1k a year per year of your own money, from 2000 to 2015 you would already have $15K just on the money you added without investing.
Thanks Heather.
Thank you too!
Without my readers I just would spend all my time on holiday – and that probably wouldn’t be good for my brain!
x
h
I am a regular reader of you weekly blogs. I also like the idea of a new book which would buy for sure. Please keep the blogs come and your vacation trips. I am 89 and enjoy seeing your pictures and detail of some of special daunting activity.
Hi Larry – nice to hear from you!
Yes, the book seems to be something I should do – its such a lot of work and I’ve grown lazy on my holiday!
Glad you liked the photos of the holiday – I tried to keep them to a minimum and not be too self-indulgent, but I also wanted to show the kind of lifestyle you can get from ITM.
But no more holidays until November I think – then its all dress-ups and hats for the Melbourne Cup!
h
Greetings, Heather! Welcome back home. Congratulations on your gains. And thanks for sharing your methods with us. You’re a rock star, lady!
Hi Stephen – thank you for your kind words! I am blushing!
x
h
As for AI and consciousness, has anyone yet come up with a definition of consciousness that is concrete, measurable, not self-referential, and generally accepted? If not, the question of whether or not AI is yet conscious is meaningless.
The question of whether AI is useful and where is it useful is meaningful, however.
Hi Jay – I don’t think I have seen a definition, it is one of those words that everyone ‘knows’ – so I decided to ask ChatGPT! Reply:
Consciousness is the state in which a being has subjective experience (“what it feels like”), is aware of itself and its environment, and can use and report that information to guide behavior.
By that definition clearly a software program can not be conscious. So I asked: Are you conscious?
No. I’m not conscious.
I’m a language model that predicts text from patterns in data; I have no subjective experience, awareness, feelings, goals, or understanding. “I” is just a conversational shortcut, not a self.
Interexsting?
h
“Consciousness is the state in which a being has subjective experience (“what it feels like”), is aware of itself and its environment, and can use and report that information to guide behavior.”
Our new Tesla is (possibly?) only missing one of those criteria in that it (may) not have subjective experience. There is really no way to verify that, though. However, it is certainly aware of its environment and can use and report that information to guide its behavior – i.e. Full Self Drive (FSD). We live in interesting times for sure!
Hey Jimbert – ah, but what does ‘aware’ mean? Certainly it can react to its environment, but is it aware?
But yes, fascinating times!
h
Agree with other blog responders – combining the bull and bear strategies and updating the back testing results to current day – in color – would be a very useful asset.
Hey JB – thank you for feedback – I’ve been mapping the book out in my head, and I am worried that it may be too long. I’ll have to think a bit more.
h
Dear Heather,
Thank you for your weekly blogs as always. Speaking of your 103 days of traveling, may we the ITM readers and traders and investors live to 103 plus years old. Welcome back to Australia.
Sincerely
George Henry
Ho Gearoge Henry – today the sun is out, the ocean is sparkiling and I’m just wearing jeans and a T-shirt. Winter is over, and its nice to be back for spring.
Thanks!
h
Heather, no need to be a dilettante; you are already a diva.
Thank you Roger!
Much appreciated!
h
Now click your heels and repeat after me ” there’s no place like home” . Adventures are so fun and much rewarding but returning home can be your solace. I wouldn’t know what to do with my morning cup of Joe if I couldn’t read your blog with it. My thoughts are that we should always stay relevant, so updating your book bringing in interviews would very much do so. Glad you had a good vacation. Now back to work!
Hi Michael – I had to look up ‘cup of Joe’ – never heard that expression before.
Thank you, and yes, I am leaning towards the final, definitive book.
Thank you!
h
AI could never replace your blog Heather! Over the weekend I watched a Youtube interview with Sir Roger Penrose. On AI he said, definitely useful, but it’s not “intelligence”, just greater recall by stronger computers. “To be intelligent, you must be conscious, which AI is not. Only by being conscious can you understand what you’re doing, a leap AI cannot make, but useful nevertheless.”
So I would add, we’re all safe for the time being…..
My vote is for one last book – conscious “understanding” and clarity that only you can bring!
“Writing one last book, combining the bull and the bear and bringing the backtesting and results up to date, and in full color”.
Hi Blake
yes, I agree that is is not ‘intelligence’ – and definitely involves recal by stronger computers.
But it is creative in the sense that when you give it a problem (for example IT – a bit of code you need to make something work, or even ‘how do I do this?)it goes off, reads the manuals and comes back and tells you step by step. I love that side of it – even for simple Excel functions I find myself just getting him to do it.
I haven’t really explored the writing side, but I am impressed at even getting my style, which is a bit ‘I think of the question a reader would ask at that point and answer it’.
Yes, I am leaning towards the last book, just so that there is a definitive amalgamation of the strategies and backtesting, and I think color would be a good idea too – make the chares etc easier to read.
Thank you!
h
Welcome back! At this point you Lead and I will follow. I’m just glad to be a part of the team…
Where was the blog. Where was the blog. Where was the blog. Stone her!
lol.
r
Made me laugh!!
x
h
Hi Heather! In the “In The Money Bear” book, you list all bull and bear trades up until August 31, 2021. Have you tested the dates of all the bull and bear trades since then? If so, would you please be able to show those dates? Otherwise, I would need to read every blog since then. Thank You!
Hi Brian, The latest edition has all the bull trades up to August 2024 – I think. The bear less so since we haven’t had a full-on bear to trade. Since then, the results would only be better as we are in a bull market.
I am thinking of updating all the backtesting, bull and bear, and possibly introducing QQQ as well and combining it into one last, full-color book.
However, if you have access to charts you dot need to trawl back through the blog posts. The rules for the ITM bull strategy are in on the 10/200 SMA golden cross, and out on the 10/200 SMA death cross, so if you use your cross hairs on a chart you will be able to read off the prices when we got in and when we got out.
I am just checking whether I have the energy and inclination to immerse myself in backtesting and writing again – it takes longer and is more involved than you think as I do every thing myself.
h
I appreciate for the reply, Heather, and your work. I have purchased all of your books, and am hoping you do that last book. But I also understand if it’s too much. I guess just go please keep us posted. Thanks!
Hey Brian – thank you!
I am trying to get out of holiday mode and back into harness . . . but . . . but . .
x
h